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Weekly UpdatesThis checklist is for managers new to benchmarking or for those wishing to review their current benchmarking practice.
Benchmarking is a powerful tool for organisations seeking continuous improvement. It is an essential part of many change programmes, including total quality management and business process re-engineering. It is a challenging technique to use and requires careful management and a high level of commitment. Used effectively, it can provide organisations with a continuous competitive advantage.
Various types of benchmarking exist, including:
* Internal benchmarking--the measurement and comparison of practices with similar practices in other parts of the organisation.
* Industry or competitive benchmarking--industry-specific comparisons made either between direct competitors or with target companies making dissimilar products in the same industry.
* Functional or non-competitive benchmarking--the direct comparison of a function in two or more organisations, which may or may not be in the same industry.
* Generic or best practice/world class benchmarking--benchmarking of the best practice of recognised world class organisations.
Most organisations can use either one or a mixture of these.
Management Standards
This checklist has relevance to the MSC National Occupational Standards for Management: Key Roles A and B--Manage Activities and Manage Resources.
Definition
Benchmarking is the ongoing structured process of identifying, understanding and adapting outstanding practices of industry leaders to help an organisation improve its performance and achieve and sustain competitive advantage.
Advantages of benchmarking
* Aids the setting or stretching of performance goals.
* Focuses on and accelerates change.
* Motivates staff by showing what is possible.
* Provides an early warning of competitive disadvantage.
Disadvantages of benchmarking
Benchmarking can fail for a number of reasons, including a lack of commitment, focus or resources. However there are no substantial disadvantages to benchmarking.
Action checklist
1. Plan your study
Identify the critical performance factors at which you wish to excel and from these select the broad areas in which to benchmark. Focus on those activities which are of real importance to your organisation, avoiding the irrelevant, or those activities chosen simply because they are easy to measure.
Select a small number of related processes to benchmark. Do not be too ambitious at this stage, particularly if this is the first benchmarking project your organisation has undertaken. When selecting processes to benchmark remember the critical success factors--benchmarking must have the support of senior management, be part of organisational strategy, and be based upon a sound understanding of your own processes.
Consider the legal and ethical issues of competitive benchmarking. Confidentiality and data security are important issues for benchmarking partners and groups.
2. Identifying personnel
Select a benchmarking team and a team leader. Most benchmarking is done by teams to take advantage of the range of skills and knowledge that they can offer--either use an intact work group, a cross-functional team or a functional team (six members is an average team size). Although much work will be carried out by the benchmarking team, it is advantageous to encourage the participation of all staff, as benchmarking may identify gaps in performance which may require radical change anywhere within the organisation. The involvement of process owners ensures they are part of the evaluation process and can become the champions of change.
3. Examine the process(es) to be benchmarked
Document the process(es) to be benchmarked to gain an understanding of the activities involved. Simple flow charts can be useful aids to help define the inputs to, and outputs from, the process. It is possible that a number of elements could be measured, so it is important for the benchmarking team to determine those which are true indicators of performance.
4. Data collection
Data are required in order to make a comparison between organisations or parts of an organisation. This may be in the form of statistics, ratios or detailed case studies and descriptions. As the key to the success of benchmarking projects the data collection process should be carefully planned. Only collect the data that is required for the decision making process: collecting too much data can be as bad as collecting the wrong data.
5. Identify benchmarking partners
Consider internal sources (different departments, divisions or companies within the organisation) and external partners (competitors, similar industries or best practice/world class performers). Sources that can help in identifying partners include trade and industry journals, market research reports, government studies, databases, suppliers, customers, corporate networks and study tours.
Consider contacting a benchmarking clearing house or a joint interest group. Organisations interested in benchmarking are listed under "Useful addresses".
Solicit the participation of partners. Organisations are often willing to become involved if they can see that they will also benefit from benchmarking--it should after all be a two-way process. You must be willing to share data and findings as well as respecting confidentiality if requested.
6. Plan and implement the comparison exercise
* Identify the hard and the soft issues which need to be measured. Hard issues include ratios, time and costs. Soft issues might include management style, communications, or customer focus.
* Prepare an action plan. Identify who will collect the data, from where and when. An appropriate survey or interview guide should be developed by the benchmarking team. Questionnaires can be sent by post, completed over the telephone or via site visits. Decide which is the most appropriate for your requirements.
* Collect the data. It is easy to underestimate the time needed to collect the data--err on the side of caution when arranging fact-finding interviews
7. Collate the data from your organisation and its benchmarking partners.
Draw up a matrix of performance indicators from your benchmarking partners (the use of spreadsheets and databases can help the analysis).
Compare your current performance against the data. Identify where your organisation misses certain elements, fails to match the targets of others and generally needs to improve. The benchmarking team should try to identify the causes of these failures and, with relevant additional staff, plan to remedy them. It is useful to research case studies of best practice, as they can form useful aids to help communicate the objectives of change.
Involve process owners in setting goals to close, meet and exceed the gaps in performance. The benchmarking team should develop detailed action plans, ensuring measures of success are included.
8. Plan and action improvements
Once the business benefits which would result from change have been identified, communicate the benchmarking findings. By demonstrating benefits, support for change will be greater.
Implement the plan, making use of `process champions' throughout the organisation as catalysts for change. It is at this stage that resources will need to be committed, so it is essential to have senior management support for the project.
9. Monitor and review
Monitor whether the study met its objectives; the impact of the improvements on the organisation; the evidence of a change in the process; the value of the changes to the organisation; the willingness and the barriers to change.
Evaluate the success of the project. Decide if further change is required.
Select the next process to benchmark. Maintaining momentum is one of the most challenging problems in benchmarking.
Dos and don'ts for benchmarking
Do
* Ensure senior management support.
* Ensure that it is a team activity.
* Understand your own processes before starting to look at those of other people.
Don't
* Be too ambitious at the start.
* Underestimate the need for a willingness to change and an openness for new ideas.
* View benchmarking as a tool for providing short termshort-term gains.
Useful reading
Books
Journal articles
Useful addresses
Thought starters
* Is the performance of your organisation as good as it could be?
* How do you match up to the performance of competitors?
* Are you focusing purely on financial measures or have you considered all your key processes?
* How do your processes compare with those being run by other organisations?
Further Information
Checklists are available in the following formats:
* Individual checklists.
* A complete set of 195 on CD-ROM or in hard copy.
* Checklists with permission to photocopy.
Full details of the range of checklists available can be obtained from:
Lavis Marketing, 73 Lime Walk, Headington, Oxford, OX3 7AD Tel: 0845 702 3736 (local rate call) Fax: + 44 1865 750079 or from Checkpoint on the Chartered Management Institute's website at www.managers.org.uk
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